Consumer Confidence Up Again, Major Purchases Delayed, Reality Still Bites

The Nationwide Consumer Confidence Index for August, released today, shows:

Consumer Confidence Up Again . . .

• Consumer confidence rose by two points to 63 in August, the fifth consecutive monthly rise, and considerably higher than the 50 registered in August 2008 or the low of 46 in January 2009.
• The Expectations Index, which reflects sentiment about the economy, labour market and household income over the next six months, increased by three points to 94, well off the August 2008 low of 53.

Major Purchases Delayed . . .

• The Spending Index, which reflects sentiment about spending on household goods and major purchases, increased by one point to 97, considerably above the August 2008 low of 51.
• The number of consumers that believe now is a good time to make a major purchase decreased from 35% in July to 33% in August.
• The number of consumers who believe now is a bad time to purchase household goods decreased to 13% from 16% in July.

Reality Still Bites . . .

• The Present Situation Index, which reflects sentiment about the current economic and employment situation, increased by one point to 17 from July’s all-time low of 16.
• The percentage of consumers that believe the current economic situation is bad dropped to 72% in August, three percentage points less than July’s 75%.
• The number of consumers who believe there are now fewer jobs available fell from 74% in July to 71% in August.

What this appears to suggest is that growing optimism in previous months, as indicated by a rising Expectations Index, has yet to materialise for households, evidenced by the Present Situation Index.

There will be some hope that the Present Situation Index low of 16, recorded in July, will be the bottom for this cycle. However, the realities of being in secular bulls for unemployment and taxation, coupled with a secular bear for surplus household disposable income, suggest that some indices may not revisit their previous highs for many years to come.

Data: Nationwide Consumer Confidence Index [PDF]

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